Large manufacturers face large amount of uncertainty

Makers of machinery and heavy equipment have been doing the heavy lifting for the economy the last couple years, but The Wall Street Journalsays those companies seem to be “running out of steam as they prepare to report quarterly earnings.”

When Cleveland-based Eaton Corp., as well as Caterpillar Inc., Cummins Inc. and others release results this week and next, “they are expected to acknowledge that some customers are canceling or postponing orders amid an unusually thick fog of uncertainty over government economic policies,” The Journal reports. In the United States, the newspaper says, “anxiety centers on next month's presidential election and the threat of tax increases and government spending cuts at the end of this year unless Congress reaches a budgetary compromise.”

(Still, analysts see Eaton earnings rising about 1%. At Cummins, for instance, they forecast a 19% drop.)

The Journal notes that Parker Hannifin Corp., which makes hydraulic equipment, last Friday posted a 20% drop in earnings for its fiscal first quarter ended Sept. 30 and cut its earnings guidance for the year ending next June 30. Parker now expects earnings to be down between 9% and 17% in the fiscal year.

CEO Donald Washkewicz tells The Journal that business in July and August was ahead of the company's plan but that the company was hit suddenly in September by a wave of canceled or delayed orders from makers of construction and mining equipment, among others.

Looking at the global economic outlook, he says, "I don't see a cliff. It just seems like a flat-lining, waiting for something to happen." Parker hasn't yet seen improvement in Europe or China, the newspaper reports, but business remains solid in such areas as aerospace, oil and chemical refining, farm equipment and commercial refrigeration, Mr. Washkewicz says.

Not so super

Our politicized debate about health care doesn't usually get around to this subject: people known as “super-utilizers,” who place a huge and costly burden on the medical system.

“Simply put, super-utilizers are people who overuse emergency departments and hospital inpatient services, making more visits to those facilities in a month than some people make in a lifetime,” The Washington Post says.

Cleveland is one of six communities, The Post notes, in which the New Jersey-based Robert Wood Johnson Foundation has made a total of $2.1 million in grants to address super-utilizer situations.

Susan Mende, a senior program officer at the foundation, tells the newspaper that these patients suffer from “multiple chronic complex diseases, including mental health issues” along with “really difficult social situations” such as inadequate — or nonexistent — housing. They also lack a primary care physician or other medical home, so their health care is haphazard and uncoordinated, Mr. Mende said.

The Post reports that the first task facing the grant recipients is to identify the local super-utilizers by “looking at emergency room data across multiple hospitals.”

Figuring out how to serve this population more efficiently is critical, the foundation notes, because the sickest 5% of U.S. patients account for more than 60% of health care costs.

The Wall Street Journal reports that U.K. taxpayers “own 81% of RBS as a result of the £45.5 billion ($72.8 billion) bailout of the bank in 2008. Government officials and the country's main financial regulator, the Financial Services Authority, recently have pushed RBS management to sell the U.S. operation as part of an effort to slim down RBS, refocus it on its home market and thicken its capital cushion, said people familiar with the talks.”

RBS Citizens, based in Providence, R.I., has nearly 1,500 branches in 13 states, and about $140 billion in assets.

Royal Bank of Scotland “paid just $440 million in 1988 for its controlling stake and has made significant investments in Citizens since then,” The Journal notes. “Citizens ranks 17th in deposits among all U.S. banks as of June 30. It is the No. 3 bank by market share in the Boston metropolitan area, and fourth-largest in deposits in Cleveland and Albany, N.Y., according to the FDIC.”

Citizens “has long been attractive to some large U.S. banks eager to expand in the northeastern U.S. and Midwest, and has received informal acquisition offers, said people familiar with those approaches,” the newspaper reports. “But RBS might have difficulty finding a buyer because many financial institutions still are recovering from the crisis, and regulators and central bankers are wary of big banks getting bigger.”

I'm a sucker for tales like this. The business James Haslam founded with one gas station in 1958 now has 496 outlets — they're combination gas stations and retail stores — that produced nearly $30 billion in sales last year.

There are a lot of interesting details, including the active (and quite helpful) role that Jimmy Haslam took in the company while still a college student.

The elder Mr. Haslam concludes with three pieces of advice for business people:

Do the right thing. If an employee needs medical treatment for a family member, give him time off. If a customer is dissatisfied with a product, take it back and make him happy. Be a good corporate citizen. People will remember what you do.

Hold people accountable. We have monthly goals. If our people don't make them, they have to explain why. When they make their goals, we reward them.

Keep an eye on the competition. We'll have a mystery shopper visit one of our stores, and he'll mystery-shop one of our competitors. If the competition wins, we look at why it was better than us, and we make sure it never happens again.